I’m thankful I’m not over-extended in my financial obligations. Well, sort of. Got plenty to pay back. I could use some oil money.
The government of Dubai, in a blunt acknowledgment of the severity of its financial position, said on Wednesday that it had asked its banks for a six-month stay on its schedule of debt repayments.
The terse statement came in the middle of negotiations between creditors and Dubai World, the corporate arm of Dubai, which has led many of its most ambitious real estate projects, but is now struggling under the burden of $59 billion in liabilities.
For the banks that financed the debt-fueled ascent of Dubai — analysts’ estimates put its total debt at about $80 billion — the move by Dubai to obtain a standstill highlights a truth that many in the region had been trying to make clear to bankers. It is that Abu Dhabi, the oil-rich governing emirate of the United Arab Emirates, will not unconditionally bail out its more profligate neighbor. Instead, a genuine restructuring of Dubai’s debt, with pain being shared equally between Dubai and its bankers, needs to take place.
Try doing that with your credit cards. One by-product of this crazy borrow-and-spend oil economy is the world’s tallest building, the Burj Dubai. Check out this view from the top…